Volatile markets, a weak dollar and next year's presidential elections are some of the moving parts wealth managers must contend with when it comes to preserving their clients' assets in 2008, said a group of top wealth managers at the Dow Jones Wealth Management Advisory Council panel discussion in New York on Tuesday.
"Changes in global markets, a weakening dollar and the political environment are affecting the way high-net-worth investors will approach investing in 2008," said George J. Schietinger, director, Credit Suisse Private Banking USA and a council member. "Heading into 2008, wealth managers will be advising their clients on how to mitigate exposure to volatile markets, while at the same time finding opportunities to grow their capital."
The council is a group of leading wealth managers formed in 2005 to promote the practice of wealth management, facilitate industry discussion, and represent the needs and concerns of the profession.
Schietinger said basic client assumptions such as "your home is a store of value, that we can sell it and finance our retirement," and that money market funds and municipal bonds are safe, aren't necessarily valid assumptions today. He said wealth managers should be contacting clients about tactical investments, of investing part of their clients' portfolios to benefit from the changing market while keeping strategic investments on track for long-term goals.
"We're in a world where less than half the world markets are U.S. dominated," Schietinger said. "Only 43% are U.S.-based. Do your clients have portfolios reflecting that? Probably not." He said wealth managers should consider a host of new vehicles developed recently to take account of changing market conditions, such as electronic traded funds (ETFs), structured products, and private equity funds and hedge funds. "Not only do we have a broadening (of investment opportunities) beyond our borders, but a broadening of investment vehicles underlying them to give you access to those markets."
Echoing Schietinger's remarks, Michael Sawyer, managing director-wealth management at Citi Family Office, said the group is bullish on international markets in 2008. "As long as we keep our clients diversified, making them increase their non-dollar exposures by different means, we can continue to achieve their goals," he said.
Joseph W. Montgomery, Wachovia Securities' managing director of investments, said the changing of the guard in Washington makes for uncertain tax policy going forward, particularly with capital gains and estate taxes He noted it was critical that clients meet with their wealth managers, CPAs, and tax attorneys in the new year. "We're lining up clients to talk about those types of things early in the first quarter, if not already in the fourth quarter," Montgomery said.
James A. Covell, senior vice president-financial consultant at RBC Dain Rauscher, underscored the need for wealth managers to take a macro perspective with their clients' investments. This could include plans to support their children and parents, retirement plans, whether their assets are titled properly, whether their paperwork is in order, and market conditions that might warrant changes in their portfolios.
-Bruce W. Fraser